The retail media landscape might be young, but it’s moving at breakneck speed in terms of competition—and retailers are increasingly feeling less confident in their ability to increase retail media revenue.
In four short years, retail media has exploded from being an $18.8 billion business to one that’s worth $54.9 billion, according to a new Retail Media Industry report by media buying firm Dentsu. And as the pie has grown, more and more players have jumped in to grab a piece.
Intense competition is why 78% of retailers surveyed expect retail media revenue to increase in the next three years, down from 91% last year, Dentsu reported.
“It’s a drop, but it’s still a lot of retailers that are saying, ‘I’m going to see revenue increase next year,’” Megan Cameron, EVP of new stream media at Dentsu’s retail media practice, told Retail Brew. “Perhaps that level of increase is going to be smaller and the increases will be harder fought and harder earned for those retailers that do see an increase year over year.”
Retailers that run an ads business are citing their own direct retail media networks as competitors, but also called out first-party data providers like Meta and YouTube as top competitors, the report stated.
“This year was the first year that we actually saw retail media networks respond as saying that first-party data providers and then media publishers are the No. 1 and No. 2 competitors as they go out into the marketplace,” Cameron said.
“The majority of them are saying that the No. 1 competitor that they go to market against is actually a first-party data provider. So, what that points to is we are seeing this competitive landscape increase exponentially,” she added.
The drop in confidence is because retailers are competing for the same ad dollars as tech giants like Meta. “They are sitting at the same table asking for the same investment from brands and advertisers that Meta is also sitting at, and that Pinterest is also sitting at, and that first-party data providers are also sitting at,” Cameron said. “That’s a really challenging place for most retail media networks to play.”
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Ad-fin-ity: Last year, Dentsu recorded a “huge surge” in specialty retail media networks, Cameron said, adding “it comes back to the fact that specialty retailers have a very unique audience and they have a very unique relationship with that audience.”.
The share of luxury retail as a category selling items on retail media rose 12 percentage points to 34% from 22% last year.
“It happens for luxury, but it also happens for sporting goods with Dick’s Sporting Goods, also happens in the hardware space with Home Depot and Lowe’s,” Cameron added. “Those are all places where the connection with the customer is really unique.”
For advertisers starting out in this space, Cameron’s word of advice is to not overlook those smaller retail media networks because they have a small but engaged audience.
“The smaller retail media networks oftentimes have a more niche or segmented audience offering than what an Amazon or Walmart or a national-scale player can provide you,” Cameron said.
“So, if you’re looking to test and learn with a very specific subset of an audience, if you’re able to find a smaller player that is more flexible on creative or reporting [data, and] is willing to meet you in your testing plans, that’s a really great place to be investing your time and energy,” she added.
Bandy together: The Dentsu report points out that retail media serves publishers, tech partners, media networks, and more, and this convergence creates a significant opportunity.
Last year, for instance, retailers piggybacked with digital publishers to expand their reach. In 2024, Instacart partnered with the New York Times, and Best Buy integrated with CNET. Such partnerships are expected to rise in 2025 because of a natural synergy between the two.
Retailers surveyed by Dentsu reported a skewed affinity to work with tech partners because they offer more targeted solutions. Dentsu reported retailers turned from larger providers to technology partners. Retailers partnered with 23 tech players including Trade Desk, PromoteIQ, and Placements IO.